- Oil prices declined, nearing four-month lows on Wednesday.
- Improving shipping in Hormuz Strait eased supply disruption fears.
- US-Iran peace talks and sanctions waiver boosted market sentiment.
Oil prices extended their decline on Wednesday, with both Brent crude and US benchmark West Texas Intermediate (WTI) hovering near four-month lows, as signs of improving shipping activity through the Strait of Hormuz eased concerns over a prolonged supply disruption.
The latest slide in crude prices comes after weeks of volatility triggered by tensions in West Asia. However, improving tanker movement, easing geopolitical risks and expectations of smoother oil flows have begun shifting market sentiment.
Crude Prices Extend Weekly Losses
Brent crude futures fell 78 cents, or 1.0 per cent, to $76.30 a barrel, while US WTI crude slipped 78 cents, or 1.1 per cent, to $72.43 a barrel in early Asian trade.
Both benchmarks had already ended Tuesday’s session around 1 per cent lower, touching their weakest levels since early March, reported Reuters.
The decline reflects growing confidence that one of the world’s most critical energy chokepoints may gradually return to normal operations after months of uncertainty.
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Strait of Hormuz Shows Signs of Recovery
A key factor behind the recent weakness in oil prices has been the gradual increase in vessel movements through the Strait of Hormuz, a route that carries a significant share of global oil shipments.
According to ING commodity strategists, recent increases in vessel crossings have improved market confidence, even though traffic remains below levels seen before the conflict.
Ship-tracking data indicated that three stranded supertankers successfully passed through the strait on Tuesday, while the United Nations shipping agency said plans are underway to help hundreds of vessels and more than 11,000 seafarers stranded in the Gulf resume operations following the US-Iran ceasefire agreement.
Peace Talks Add Pressure on Oil Prices
Market sentiment has also been influenced by diplomatic developments between Washington and Tehran.
Oil prices have come under additional pressure after the US granted Iran a 60-day sanctions waiver following initial peace talks, allowing the country to continue selling crude oil. At the same time, hostilities in Lebanon have eased, reducing fears of a broader regional escalation.
Tomomichi Akuta, Senior Economist at Mitsubishi UFJ Research and Consulting, said hopes of improving US-Iran relations and recovering oil shipments through Hormuz had weighed on crude prices.
He added that further progress in nuclear negotiations could potentially push oil prices back towards levels seen before the conflict intensified.
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Questions Remain Over Long-Term Stability
Despite the improving mood, uncertainty continues to linger over the durability of the emerging peace framework.
US President Donald Trump said Iran had agreed to allow nuclear inspections indefinitely, a claim that Tehran has publicly disputed.
Meanwhile, Oman and Iran have agreed to continue discussions on the future administration of navigation through the Strait of Hormuz. US Secretary of State Marco Rubio also warned that any attempt by Iran to impose transit fees would breach international law.
An Iranian military source told Fars news agency that only a limited number of vessels are currently being allowed through the waterway each day under coordination with Iran’s Revolutionary Guards Navy.
Markets Watch Supply and Inventory Trends
Apart from geopolitical developments, traders are closely monitoring the pace at which Middle Eastern producers can restore exports.
Fresh inventory data also offered support to market watchers assessing supply-demand dynamics. According to market sources citing figures from the American Petroleum Institute (API), US crude stockpiles declined by 765,000 barrels during the week ended June 19.
However, the drawdown was smaller than market expectations. Analysts surveyed by Reuters had projected an average decline of around 4.5 million barrels.
Focus Shifts From Conflict to Supply
For much of the past few months, oil markets were driven by fears of supply disruptions, shipping bottlenecks and the possibility of a wider regional conflict.
Now, investors are increasingly shifting their focus towards the reopening of trade routes, the return of stranded vessels and the prospects of additional Iranian crude reaching global markets.
While geopolitical risks have not disappeared entirely, the market appears to be pricing in a scenario where supply flows gradually normalise, reducing some of the risk premium that had pushed oil prices sharply higher earlier this year.
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